DC2020-0007 October 16, 2020 · Overall, the crisis could push 100 million people into extreme...

DEVELOPMENT COMMITTEE (Joint Ministerial Committee

of the Boards of Governors of the Bank and the Fund

on the Transfer of Real Resources to Developing Countries)

DC2020-0007

October 16, 2020

Joint IMF-WBG Staff Note: Implementation and Extension of the Debt Service Suspension Initiative

Attached is the document titled “Joint IMF-WBG Staff Note: Implementation and Extension of the Debt Service Suspension Initiative” prepared by the World Bank Group and International Monetary Fund for the virtual October 16, 2020 Development Committee Meeting.

Official Use

IMPLEMENTATION AND EXTENSION OF THE DEBT SERVICE SUSPENSION INITIATIVE

EXECUTIVE SUMMARY

The COVID-19 pandemic is heavily impacting the world’s poorest countries.

Economic activity in the poorest countries is expected to drop about 2.8 percent in

2020. The pandemic spread to these countries has lagged contagion in advanced

economies and emerging markets, but some countries have seen a rapid surge. Health

challenges may rise and containment measures have come at an economic cost.

Overall, the crisis could push 100 million people into extreme poverty and raise the

global poverty rate for the first time in a generation.

The Debt Service Suspension Initiative (DSSI) has enabled a fast and coordinated

release of additional resources to beneficiary countries to bolster their crisis

mitigation efforts. It was endorsed by the G20 Finance Ministers in April 2020 and

became effective on May 1, 2020. As of end-August, 43 countries are benefitting from an

estimated US$5 billion in temporary debt service suspension from official bilateral

creditors, accounting for more than 75 percent of eligible official bilateral debt service

under the DSSI in 2020. The DSSI supported substantial COVID-19 related spending as

participating countries faced major revenue shortfalls.

The DSSI has also allowed to make significant progress in enhancing transparency

of public debt to help borrowing countries and their creditors make more

informed borrowing and investment decisions. The World Bank has published

detailed external public debt data by creditor group and potential debt service

suspension amounts from DSSI for borrowing countries, facilitating data sharing and

coordination among creditors.

An extension of up to one year of the DSSI is recommended in view of the

continuing financing pressures on the beneficiary countries owing to the pandemic,

with the second six months subject to confirmation in a mid-term review, in view

of the need for broader participation by commercial and official bilateral creditors.

More than half of all DSSI participants are assessed to be at high risk of debt distress or

already in debt distress according to debt sustainability analysis as of mid-August 2020.

Fiscal monitoring indicates that DSSI participating countries are undertaking substantial

COVID-19 related spending even as they face major revenue shortfalls. Analysis based

on WEO projections shows that liquidity support will remain essential throughout 2021.

A timely decision to extend the DSSI would help countries plan and reap the full benefits

of the initiative.

September 28, 2020


2

Official Use

Some modifications of the DSSI are recommended:

• First, the DSSI should be extended by up to one year, given the depth of the crisis

and elevated financing needs, subject to a midpoint review, with some possible

amendments to the April term sheet as discussed below. A timely decision to extend

the DSSI, which enables requests for DSSI in 2021 to come even before end 2020,

together with adopting common procedures for country requests and other

communications that ensure the IMF-WBG are fully informed about any delays in

processing DSSI requests, would allow requesting countries to fully benefit from DSSI.

• Second, to maximize much needed support to eligible countries, all official bilateral

creditor institutions, including national policy banks, should implement the DSSI in a

transparent manner using a common published MOU that could clarify which claims

should not be covered by the DSSI.

• Third, to maximize the ability of DSSI beneficiaries to continue providing

extraordinary pandemic support to individuals and firms through health, social and

economic spending, and in the spirit of fairness, G20 countries should take all possible

steps to urge participation in DSSI by their private and bilateral public sector creditors,

regardless of whether they are considered national policy banks or commercial entities.

• Fourth, the common MOU should provide clear debt transparency and public debt

disclosure requirements which extend to the terms and conditions of public debt

(including collateral as feasible) and which are based on a comprehensive statistical

definition of public debt.

• Fifth, flexibility in the repayment schedule would help avoid exacerbating peaks in

debt service burdens.

• Sixth, continued fiscal monitoring remains appropriate in 2021 to help ensure

priority spending is protected to contain the longer-term economic and social costs

from the pandemic and thereby support sustainability.

The G20 should facilitate debt resolution for countries with unsustainable debt,

including for countries outside the DSSI perimeter. The public debt outlook has

deteriorated sharply in DSSI-eligible countries in the first half of 2020. It is important to

detect and address insolvent situations upfront. The G20 should therefore facilitate timely

and comprehensive debt resolution involving the private sector to restore debt

sustainability, to avoid borrowing countries with unsustainable debt burdens undergoing

multiple and protracted debt reschedulings. For countries with high risk of debt distress,

or that have been assessed to have unsustainable debt, the G20 could consider

conditioning DSSI access in 2021 on requesting and working toward a Fund-supported

reform program aimed at reducing debt vulnerabilities and addressing debt levels where

needed. Building on the approach of the DSSI, it could be useful for G20 creditors to


3

Official Use

consider the adoption of a term sheet with principles to guide sovereign debt resolution

during the pandemic, as timely and comprehensive resolution would benefit debtor

countries and the global economy. To facilitate this process, the Development Committee

should consider asking WB and IMF to develop by the end of 2020 a joint action plan for

debt reduction for IDA countries in unsustainable debt situations.

Strengthening debt management and debt transparency should be top priorities.

With the current uncertain outlook for global growth, debt service needs to be carefully

managed even for countries where debt remains sustainable. It is important that public

debt transparency be based on a comprehensive concept of public debt, and that it

extends to the borrowing terms and collateral. The IMF and the World Bank will

continue efforts to encourage debt and investment transparency, transparent reporting

on debt stocks and flows, and full disclosure by creditors and debtors of the terms of

debt restructurings and the rescheduling of any DSSI eligible debt.


4

Official Use

Approved By Jeromin Zettelmeyer

(IMF) and Marcello

Estevão (WB)

Prepared by the IMF (Strategy Policy and Review, Fiscal Affairs, and

Monetary and Capital Markets departments) and the World Bank’s

Global Macro and Debt Unit in MTI. The IMF team was led by

Craig Beaumont and Dalia Hakura and included Tamon Asonuma,

Claudia Isern, Mike Li, Marisol, Murillo, Kei Nakatani, Joyce Saito and

Dilek Sevinc, Carine Meyimdjui (all SPR) and Ally Myrvoda and Kay

Chung (MCM). The section on monitoring of spending under the DSSI

was led by Kenji Moriyama (IMF-FAD) and included Sofia Cerna

Rubinstein, Paulomi Mehta, Keyra Primus and Julie Vaselopulos (FAD).

The World Bank team was led by Doerte Doemeland and included

Lilia Razlog, Diego Rivetti, Vivian Norambuena, Luca Bandiera,

Mellany Pintado Vazques, Sebastian Essl, Vasileios Tsiropoulos, and

Marijn Verhoeven (all MTI) and Nada Hamadeh and Evis Rucaj (DEC).

The section on monitoring of spending under the DSSI was led by

Chiara Bronchi and included Robert Utz, Massimo Mastruzzi (all MTI),

Tracey Lane and Srinivas Gurazada (GOV). This paper has benefitted

from extensive discussions with an interdepartmental working group.

CONTENTS

ABBREVIATIONS AND ACRONYMS ____________________________________________________________ 6

INTRODUCTION _________________________________________________________________________________ 7

DSSI IMPLEMENTATION UPDATE _____________________________________________________________ 10

MONITORING OF SPENDING UNDER THE DSSI ______________________________________________ 17

PUBLIC DEBT DISCLOSURE_____________________________________________________________________ 21

NON-CONCESSIONAL BORROWING UNDER DSSI ____________________________________________ 22

LIQUIDITY NEEDS AND DEBT SUSTAINABILITY ______________________________________________ 24

RECOMMENDATIONS __________________________________________________________________________ 33

BOXES

1. Commercial Debt Service and DSSI ___________________________________________________________ 14

2. Debt Service Profile and the Terms of Suspension ____________________________________________ 32


5

Official Use

FIGURES

1. Covid-19 Cases in DSSI Countries by Region and the United States ____________________________ 8

2. Share of Market Access Countries _____________________________________________________________ 11

3. Regional Participation in DSSI _________________________________________________________________ 11

4. Revenues, Expenditures (including COVID-related), and Fiscal Deficits ________________________ 20

5. External Financing Needs _____________________________________________________________________ 25

6. Estimated Fiscal and External Gross Financing Needs _________________________________________ 26

7. Development of Public Debt (2009–24) _______________________________________________________ 28

8. Evolution of Risk of External Debt Distress ____________________________________________________ 29

9. Key Debt Ratios Relative to Thresholds for Pre and Post COVID Periods ______________________ 30

TABLES

1. Summary of Fiscal Policy Responses1 _________________________________________________________ 18

2. Recent Changes in the Risk Rating Under the LIC DSF (since end-2019) ______________________ 29

3. Public Debt Composition for Countries Assessed to be in Debt Distress or at High-risk of Debt

Distress __________________________________________________________________________________________ 33

ANNEXES

l. DSSI Eligibility and Participation _______________________________________________________________ 36

ll. Non-concessional Borrowing in the Context of the DSSSI _____________________________________ 37

lll. Debt Service Suspension Initiative—Term Sheet ______________________________________________ 38

IV. Private Financing of DSSI-Eligible Countries __________________________________________________ 40


6

Official Use

Abbreviations and Acronyms

DLP Debt Limits Policy

DSA Debt Sustainability Analysis

EFN External Financing Needs

FDI Foreign Direct Investment

GDP Gross Domestic Product

GFN Gross Financing Needs

DLP Debt Limits Policy

DSSI Debt Service Suspension Initiative

IDA International Development Association

IDS International Debt Statistics

IMF International Monetary Fund

IMFC International Monetary and Financial Committee

LDC Least Developed Countries

LIC Low-Income Country

LIC DSF Joint Bank-Fund Debt Sustainability Framework for LICs

MDB Multilateral Development Bank

MOU Memorandum of Understanding

NCB Non-concessional borrowing

NCBP Non-concessional Borrowing Policy

NPV Net Present Value

RCF Rapid Credit Facility

RFI Rapid Financing Instrument

SDFP Sustainable Development Finance Policy

UN United Nations

WBG World Bank Group


7

Official Use

INTRODUCTION

1. In April 2020, the Development Committee, the IMFC, and the G20 Finance Ministers

endorsed the Debt Service Suspension Initiative (DSSI) for less developed countries. The

endorsement was a response to a call by the leaders of the World Bank and the IMF to grant debt

service suspension to the poorest countries to help them manage the severe impact of the

COVID-19 pandemic. All active International Development Association (IDA) and United Nations

Least Developed countries (UN LDC) as of FY20 were deemed eligible to participate in the DSSI

(Annex 1). The pandemic is causing severe economic stress for these countries, overwhelming weak

health systems, heavily impacting their fiscal positions, and exacerbating an already challenging

public debt situation, while increasing the risk of social unrest and fragility.1 Financing from the IMF,

the World Bank Group (WBG), and Multilateral Development Banks (MDBs) alone will not be

sufficient to enable these countries to manage the severe health, economic, and social impacts of

the pandemic. In this context, the DSSI plays an important role to help eligible countries meet their

increased needs for financing to respond effectively to the COVID-19 crisis.

2. The DSSI is being implemented as many developing countries face major adverse

spillovers from the impact of the pandemic on the global economy. The global economic

impacts of the pandemic are channeled to DSSI-eligible countries via lower exports and commodity

prices, especially oil prices, and through tourism (almost one-third of countries are heavily

dependent on tourism, and flight arrivals have dropped by more than 75 percent). Domestic

demand also suffers from a contraction in remittances, down by about 21 percent on average in

2020. Overall, the economies of DSSI-eligible countries are expected to contract by about

2.8 percent in 2020 according to the latest WEO projections, compared with average growth of

3.6 percent in the previous five years. Importantly, a permanent loss of productive capacity, or

“scarring” is expected, with a drawn-out recovery rather than a rapid rebound. The world’s poorest

have been hit especially hard by pandemic. World Bank estimates indicate that the crisis could push

100 million people into extreme poverty, with about one-third of new poor expected in Sub-Saharan

Africa.2 As a result, 2020 will mark the first net rise in global poverty in more than 20 years, with

large increases in IDA-eligible and fragile countries. Poverty outcomes could further worsen in the

absence of measures to protect the poorest and most vulnerable and limit increases in inequality

and from a more prolonged impact of the COVID-19 pandemic.3 It is expected that the development

challenges will deepen and become even more severe over the next year.

1Public debt vulnerabilities in lower-income countries before the onset of the pandemic were analyzed in IMF and

World Bank (2020) “The Evolution of Public Debt Vulnerabilities in Lower-Income Economies”.

2See “Profiles of the new poor due to the COVID-19 pandemic”, (2020).

http://pubdocs.worldbank.org/en/767501596721696943/Profiles-of-the-new-poor-due-to-the-COVID-19-

pandemic.pdf

3See “Updated estimates of the impact of COVID-19 on global poverty”, available at

https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty.

https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/02/05/The-Evolution-of-Public-Debt-Vulnerabilities-In-Lower-Income-Economies-49018

http://pubdocs.worldbank.org/en/767501596721696943/Profiles-of-the-new-poor-due-to-the-COVID-19-pandemic.pdf

http://pubdocs.worldbank.org/en/767501596721696943/Profiles-of-the-new-poor-due-to-the-COVID-19-pandemic.pdf

https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty


8

Official Use

3. The pandemic’s spread in DSSI-eligible countries has lagged that in advanced

economies and emerging markets, but some DSSI-eligible countries are now experiencing a

rapid surge (Figure 1). The COVID-19 pandemic has hit DSSI-eligible countries later than AEs or

EMs, and in many DSSI-eligible countries reported infection rates are still fairly low, which to some

extent also reflects limited testing in DSSI-eligible countries relative to EMs and AEs. There are

significant regional disparities, with the pandemic spreading (at different speeds) in South Asia, sub-

Saharan Africa, Middle East and North Africa, and Latin America and the Caribbean. By contrast, the

pandemic has so far been relatively contained in East Asia.4

Figure 1. COVID-19 Cases in DSSI Countries by Region and the United States

(as of September 20, 2020)

Source: https://covidtracker.bsg.ox.ac.uk/

4. In these unprecedented circumstances, the DSSI enabled a fast, coordinated response

to enhance fiscal breathing space for the poorest countries in the world. After being endorsed

in mid-April, it was implemented starting on May 1. As of end August 2020, 43 countries are

benefitting from US$5 billion in debt service suspension from the initiative,5 complementing IMF

and WB financing disbursements to DSSI eligible countries in 2020 projected to be equivalent to

about US$25 billion and US$12 billion, including US$4 billion in grants, respectively.6

4There is significant variation across East Asian countries with some countries facing significant pandemic spread or

new surges and some countries facing a significant economic and social impact, also as a result of containment

measures.

5This estimate is based on information provided by creditors as of end August 2020 and may not fully reflect the

current list of DSSI participating countries. 6DSSI eligible countries hereby refers to active IDA countries as of FY20 and Angola.

0

2

4

6

8

10

12

14

16

Nu

mb

er

of

Case

s (L

og

Scale

)

Date

United States of

America

India

Brazil

DSSI

South Asia

Africa

Europe & Central

Asia

Latin America &

Caribbean

https://covidtracker.bsg.ox.ac.uk/


9

Official Use

5. The DSSI has also allowed significant progress in enhancing transparency of public

debt. This will help borrowing countries and their creditors make more informed borrowing and

investment decisions, which is critical to lay the foundations for a robust economic recovery. The

IMF and the WBG are supporting the implementation of the DSSI, including through monitoring

spending, enhancing public debt transparency, and ensuring prudent borrowing. The World Bank

has published detailed data on external public debt and potential debt service suspension amounts

from the DSSI based on the World Bank’s International Debt Statistics (IDS) database. This type of

debt transparency is a high priority for sustainable development and recovery from the crisis. The

IMF-WBG staff have engaged with participating countries to produce an initial report on

COVID-related spending using the framework for spending monitoring that was endorsed by the

IFA Working Group meeting on June 23 (section on “Monitoring of Spending Under the DSSI”) and

provide detailed data of the debt service gains from the DSSI. The latter, is part of the commitment

from beneficiaries to disclose all public sector debt (section on “Public Debt Disclosure”) and to

prudent non-concessional borrowing in line with ceilings established under IMF programs or the

WB’s non-concessional borrowing policies (section on “Non-concessional Borrowing Under DSSI”).

6. However, DSSI implementation has also revealed several challenges, especially

inconsistent application of terms and conditions for DSSI participation across official bilateral

creditors, including national policy banks, and the absence of private sector participation

(section on “DSSI Implementation Update”). G20 creditors have expressed concern that the lack

of private creditor participation in the DSSI raises concerns that official debt service suspension

would partially benefit private creditors. This issue is particularly important if DSSI support would

defer the recognition of unsustainable debts. The G20 could consider options to mitigate such

concerns in the context of the DSSI. For countries with unsustainable debt—including those outside

the DSSI perimeter—enhanced coordinated among G20 creditors would improve debt resolution

efficiency and support fair burden sharing between the official and private sectors.

7. In view of the evolving COVID-19 pandemic, and the severe economic and social

impacts on the poorest countries that have raised their financing needs, the IMF and the WBG

staff recommend extending the DSSI for up to one year. The section on “Liquidity Needs and

Debt Sustainability” reports on the liquidity needs of eligible countries, including a discussion of

their debt service outlook for these countries. It also provides an update on developments in debt

vulnerabilities. On this basis, and taking into account the experience with implementing DSSI, the

final section of the paper recommends an extension of up to one-year, with the second six months

subject to a mid-term review, and suggests several modifications to ensure that it best supports the

poorest countries in managing the pandemic.


10

Official Use

DSSI IMPLEMENTATION UPDATE

8. As of September 18, 43 DSSI eligible countries had formally requested to join the

initiative as confirmed by G20 creditors and information provided by beneficiary countries.7

This brings the participation rate of the 73 countries eligible for the DSSI to around 60 percent. With

the total debt service benefitting from suspension of US$5.0 billion, these 43 countries account for

more than 75 percent of potentially eligible official bilateral debt service under the DSSI for the

period May to December 2020 based on World Bank estimates.8 As of September 14, 2020, the Paris

Club had received 39 formal requests and had approved 31 Memoranda of Understanding.9 In the

case of non-Paris Club creditors—which approve requests independently—for 9 countries DSSI

implementation was completed by all their creditors in this group as of September 8, 2020,10 for 21

countries DSSI implementation was partially completed (by at least one of this group but not by all

of their creditors) while a further 6 countries made DSSI requests without any yet implemented.

9. Participating countries are diverse, with the greatest share of applicants in Africa.

Sixty-five percent of participating countries are in Africa. More than half of all participants are

assessed to be at high risk of debt distress or already in debt distress according to debt

sustainability analysis as of mid-August 2020. At the same time, countries with market access

represent 30 percent of current DSSI participants, with 13 of the 23 countries that have issued a

Eurobond participating. Nineteen participants are fragile states and 11 are small states.11

10. Among the 30 countries that did not join the DSSI as of September 18, 23 countries

have firmly indicated that they are not interested in the initiative. Around half of the countries

not interested in participating in DSSI have very low debt service to official bilateral creditors during

the suspension period. Three of these countries have initiated direct dialogue with selected bilateral

creditors on debt treatments outside of the DSSI process. Ten countries have expressed concerns

about the potential implications from participating in the DSSI for planned non-concessional

borrowing, about cross-default clauses in their other borrowing, or possible indirect impacts on their

sovereign credit ratings and access to international markets. A few countries decided not to

participate since they did not wish to request IMF financing.

7Participation of these countries in the DSSI has been confirmed both by creditors and participating countries. One

country, Vanuatu, decided to withdraw from the initiative as they did not wish to request IMF financing.

8This assessment is based on the list of official bilateral creditors as reported to the International Debt Statistics and

excludes plurilateral (other official creditors with multi-country membership).

9Updates on Paris Club MOUs are provided at: http://www.clubdeparis.org/en/communications/archives

10One non-G20/non-Paris Club creditor (Portugal) has also joined the MOU of the Paris Club in some DSSI requests.

11This follows the definition of fragile and small states in IMF and World Bank (2020) on “The Evolution of Public Debt

Vulnerabilities in Lower-Income Economies.”

http://www.clubdeparis.org/en/communications/archives


11

Official Use

Figure 2. Share of Market Access Countries

(percent)

Figure 3. Regional Participation in DSSI

Sources: World Bank and Fund staff. Sources: World Bank and Fund staff.

11. DSSI implementation so far has revealed several challenges:

I. Lender participation and perimeter of claims covered by the DSSI: The enhanced reporting

by G20 creditors on debt service suspension by country and official lending institution helped

to clarify official lender participation within the G20. This has also exposed the importance of:

• Consistency on which creditors, lending institutions, or claims would be treated as official

bilateral. Different creditors use different definitions for which institutions qualify as official

bilateral creditor, including in relation to national development banks, which creates

uncertainties for beneficiary countries and could undermine comparable treatment among

creditors.

• A clear definition of the treated debt. Under the DSSI, bilateral official creditors commit to

suspend payments on all principal and interest coming due between May 1 and December

31, 2020, including all arrears from public sector borrowers. However, some creditors did not

agree to rescheduling arrears. There is a need to clarify treatment of non-traditional debt

instruments that may be classified and structured as deposits, long-term swap lines or equity

but would classify as public debt according to international standards.12 In addition,

creditors have used different treatment of debt guaranteed by the central government and

of loans involving co-financing with commercial banks.

• Transparency and disclosure of the terms of the rescheduling of any DSSI eligible debt. For

DSSI to be fully effective, there should be a standard minimum set of debt treatment

information. Lack of information disfavors other creditors and creates uncertainty for

borrowing countries. Similarly, in line with a strong practice of G20 Operational Guidelines

12As defined, for example in, IMF. 2013. Public Sector Debt Statistics: Guide for Compilers and Users. 2013.

https://www.imf.org/external/np/g20/pdf/2019/111519.pdf


12

Official Use

for Sustainable Financing Diagnostic Tool Paris Club Memoranda of Understanding signed by

Paris Club and DSSI countries should be disclosed.

II. The precise terms of participation by non-Paris Club creditors: In the early stages of DSSI

implementation, participation by some non-Paris Club creditors appeared to be linked to

conditions—or trigger consequences—beyond those envisaged in the G20 term sheet, such as

limits on access to new financing or a requirement to clear arrears before participating in the

DSSI. More recently, there have been some signs of progress toward clarifying these terms by

non-Paris Club creditors, with some having discussed using or adapting the MOU of the Paris

Club, while China has circulated the Paris Club MOU to relevant agencies and financial

institutions for their reference in implementing the DSSI. Nonetheless, some creditors have

recently suggested that additional fees may apply to the debt service suspension. Indeed, a few

countries have withdrawn their DSSI request to selected official bilateral creditors after these

creditors imposed additional conditions. A common MOU for a DSSI extension, which ruled out

such conditions, would reduce uncertainties for debtors, especially if the MOU is published.

III. Efficient implementation of DSSI: A number of countries report a lack of responses by some

creditors, or relatively lengthy discussions, including in relation to the terms above. Some have

continued to pay debt service in the interim, much reducing the benefits of the suspension. It

would be important to standardize procedures for making and processing requests to ensure

IMF-WBG staff are aware of new requests and the progress being made toward approval.13 A

timely decision by the G20 to extend the DSSI, together with enabling countries to initiate

requests for debt service suspension ahead of end 2020, would support budgeting and

planning by country authorities, along with G20 assurances that the suspension will be effective

from January 1, 2021 even if a DSSI request is approved later in the year.

IV. IMF financing requirements: According to the term sheet endorsed by the G20, access to the

initiative requires countries to be benefiting from, or to have made a written request to IMF

Management for IMF financing, including emergency facilities (RFI/RCF). The IMF prepared

guidance to Fund staff around requests for Fund financing from DSSI eligible countries, noting

that approval of the request is not required for DSSI participation. Nonetheless, one country

(Vanuatu) rescinded its DSSI participation as this required it to request IMF financing.

V. MDB options: The G20 asked multilateral development banks (MDBs) to further explore

options for the suspension of debt service payments over suspension period, while maintaining

their current rating and low cost of funding. MDBs, working with the IMF, provided a joint

response to the G20.14 The participation of MDBs in the DSSI would likely reduce net funding to

13While IMF and World Bank can support the implementation of the initiative by furnishing templates and

information provided by the G20 to borrowing countries and supporting other implementation arrangements, such

as fiscal monitoring, debt transparency commitments and the implementation of debt ceilings, borrowing countries

would need to contact creditors.

14See “Protecting the Poorest Countries: Role of the Multilateral Development Banks in Times of Crisis - Explanatory

Note”, July 7, 2020.

https://www.imf.org/external/np/g20/pdf/2019/111519.pdf


13

Official Use

IDA countries by undermining the attractiveness of MDB debt, including IDA debt, and

increasing IDA and IBRD’s funding costs significantly. Because of its terms - low interest rates,

long grace periods, and in many cases outright grants - the World Bank’s transfers to client

countries entail significant concessionality and present value reduction. More than half (39 of

70) of IDA19 active countries already receive all, or half, of their IDA resources on grant terms,

which carry no payments at all. The attractiveness of IDA and IBRD terms relies in part on the

ability to access capital markets to secure the additional financing that will be needed for the

scaled-up crisis response. Two out of the three major rating agencies have emphasized that

participation in debt service suspension could exert downward rating pressure. Without their

very strong triple-A ratings, MDBs such as IBRD and IDA could not sustain their business model

of borrowing cheaply and lending to clients that would represent much higher risk to other,

non-preferred creditors. For the period April-December 2020, debt service from IDA19 eligible

countries (plus Angola) to MDBs amount to approximately US$7 billion. While this is a large

number, it is far less than new commitments and disbursements from these institutions. For

instance, projected disbursements from the MDBs to IDA19-eligible countries (plus Angola)

during the same period amount to US$45 billion, which is more than six times the total debt

service, and 129 percent higher than the three-quarter average for years 2017–19.

12. These implementation challenges should be addressed to ensure participating

countries gain the full intended benefits of the DSSI. Lack of full creditor participation, delayed

implementation, and requests from some creditors to impose additional conditions, reduce the

benefits for participating countries and increase uncertainty. Participating countries would therefore

greatly benefit if all official bilateral creditors were to implement the DSSI consistently, as agreed in

the context of a common MOU. In particular, G20 governments should consider steps to ensure

participation by all private sector creditors and all bilateral public sector creditors, regardless of

whether they are considered official bilateral creditors, commercial or policy banks, while, in parallel,

beneficiary countries could be expected to make requests to all their official creditors, and official

creditors should process these requests in a timely and transparent manner.

13. The G20 called on private creditors to participate in the initiative on comparable

terms, which is most relevant for about one-quarter of DSSI participants with sizable

commercial debt service (Box 1). More than half of countries that participate in the DSSI have

debt service coming due to commercial creditors (both loans and international bonds) during the

May-December 2020 period.15 While debt service to private creditors is small in many of these

countries, it exceeds debt service to official bilateral creditors in ten countries according to IDS data.

Five of the latter countries receive IDA grants.

15Private creditors here are defined in line with the following IDS guideline:

https://databank.worldbank.org/data/download/site-content/ids2020-backmatter.pdf

https://databank.worldbank.org/data/download/site-content/ids2020-backmatter.pdf


14

Official Use

14. To date, private creditors have not participated in the DSSI. At least three DSSI

participating countries are so far known to have asked private creditors to participate in the DSSI. In

addition, five countries are reported to have made requests to a national policy bank which is

participating as a commercial creditor, of which two requests have been processed according to the

creditor. The IIF released a terms of reference for private participation in DSSI on a voluntary basis,

on terms to be agreed by the creditor and the debtor, but these do not appear to have been used.16

Private creditors were reluctant to reschedule debt service on comparable terms (NPV neutrality,

using the prevailing contractual interest rate as the discount rate) as this would often imply a loss

relative to market interest rates. Similarly, despite economic fundamentals deteriorating, most DSSI

eligible countries so far assessed that the costs of requesting a debt service rescheduling from their

private creditors outweigh the short-term benefits.

15. Key concerns that deter debtor countries from requesting private creditors to

participate include:

16https://www.iif.com/Press/View/ID/3918/IIF-Releases-New-Framework-to-Facilitate-Voluntary-Private-Sector-

Involvement-inthe-G20Paris-Club-Debt-Service-Suspension-Initiative.

Box 1. Commercial Debt Service and DSSI

According to DRS data, DSSI participants’ total external PPG debt service to private creditors is

estimated at USD6.8 billion over May-Dec 2020 (31 percent of total debt service on external PPG debt)

and US$ 10.1 billion for 2021 (33 percent of total debt service on external PPG debt). Around one-third

of total debt service to private creditors during this period is for international bonds. There are

significant differences among countries:

• Around 14 countries have no debt service to private creditors, while three countries (Angola,

Pakistan, and Ethiopia) account for 75 percent of debt service to non-official creditors. Four DSSI

countries Angola, Cote d’Ivoire, Pakistan and Senegal account for about 79 percent of international

bond debt service.

• Congo Rep., Ethiopia, Senegal, and Zambia owe more than 50 percent of their debt service to

commercial creditors during the period May 2020 to December 2021.

Non DSSI participants’ total external PPG debt service to private creditors is estimated at US$3.4 billion

over May-Dec 2020 (35 percent of total debt service on external PPG debt) and US$4.1 billion

throughout 2021 (29 percent of total debt service on external PPG debt). Bondholders account for two-

thirds of debt service to private creditors:

• Ghana and Kenya account for 73 percent of non-official debt service, while Kenya and Nigeria for

the 53 percent of international bond debt service. Fiji, Nigeria, Ghana, and Mongolia owe more than

50 percent of their debt service to private creditors between May and December 2020. None of

them benefit from IDA grants.

• None of the non-participating countries has an investment grade credit rating, but 15 countries

have tapped international markets in the period 2010-2020 ahead of the COVID-19 crisis and a few

plan to issue bonds going forward.

https://www.iif.com/Press/View/ID/3918/IIF-Releases-New-Framework-to-Facilitate-Voluntary-Private-Sector-Involvement-inthe-G20Paris-Club-Debt-Service-Suspension-Initiative

https://www.iif.com/Press/View/ID/3918/IIF-Releases-New-Framework-to-Facilitate-Voluntary-Private-Sector-Involvement-inthe-G20Paris-Club-Debt-Service-Suspension-Initiative


15

Official Use

• Reputational concerns. Some debtor governments may have feared that a request for such

participation would be penalized by the debt markets. There is currently limited evidence that

DSSI participation negatively affects borrowing spreads in participating countries.

• Ratings downgrades.17 While no credit rating agency has downgraded any country merely for

requesting DSSI participation, Moody’s placed several participating countries temporarily on a

negative watch, citing the G20's call for private sector creditors to participate in the DSSI on

comparable terms. More recently, Moody’s has reviewed these countries, with no downgrades.

Some remain on negative watch (Annex III). Furthermore, all three major credit agencies have

made it clear that requesting private sector participation on comparable terms could lead to a

downgrade (although this might be temporary).

• Legal risks. Depending on terms of private debt agreements, requesting debt service

suspension from private creditors could potentially trigger default or cross-default clauses in

private debt contracts, as well as litigation.18

16. Greater private creditor participation would enhance DSSI benefits for participating

countries; a general requirement for comparable treatment of private creditors could,

however, significantly lower DSSI participation. Private sector participation in the DSSI could

yield significant debt service savings in 2021 for some countries currently participating. This would

appear to be most attractive for countries with significant debt to the private sector that have lost

market access. Yet, in practice mandating that countries participating in DSSI must request

comparable treatment from private creditors could deter DSSI participation by the significant

numbers of countries seeking to protect or (re)gain market access, which they have worked hard to

achieve, even if they stand to gain resources to address the crisis in the near term.

17. To enhance the benefits of DSSI for beneficiary countries, it will be important that the

extension of the DSSI encourages full participation by private and bilateral public creditors.

To maximize the ability of DSSI beneficiaries to continue providing extraordinary pandemic support

to individuals and firms through health, social and economic spending, and in the spirit of fairness,

G20 countries should take all possible steps to urge participation in DSSI by private sector creditors

under their jurisdiction, and by bilateral public sector creditors regardless of whether they are

considered official bilateral, commercial or policy banks.

18. Relatedly, with DSSI-eligible countries showing rising risk of debt distress, there are

also concerns that DSSI could, in some cases, defer the recognition of unsustainable debt

burdens. As discussed in the section on “Liquidity Needs and Debt Sustainability”, many DSSI-

eligible countries entered the COVID-19 crisis with high debt vulnerabilities and the public debt

outlook has deteriorated sharply in these countries. Since the onset of COVID-19, the LIC-DSF risk of

debt distress ratings of four countries were downgraded, and further downgrades are likely

17Most DSSI-eligible countries do not have a sovereign credit rating and none has an investment grade rating.

18Bond contracts and loan agreements typically contain cross-default clauses. Although the precise drafting of cross-

default clauses varies, even a voluntary rescheduling of other external debt may give rise to an event of default.


16

Official Use

forthcoming. An unconditional extension of the DSSI to countries that have unsustainable debts, or

which are at high risk of becoming unsustainable could be counterproductive, by making the debt

crisis deeper and harder to resolve. Furthermore, G20 creditors have expressed concerns that

repayment of private creditors assisted by DSSI would shift the burden of debt restructuring from

the private sector to the official sector.

19. The G20 could therefore give consideration to the feasibility of targeted modifications

of the DSSI to mitigate these risks while protecting DSSI participation. Countries evaluated by

IMF-WBG staff to have a high risk of debt distress, or which are in debt distress, have the highest

likelihood of debt becoming unsustainable and of requiring a debt restructuring if other policy

measures cannot restore sustainability. If these countries also have significant debt service to the

private sector, or other non-participating creditors, the debt payment moratoria risks potentially

delaying the resolution of unsustainable debt. To prevent this from happening, for countries that

have high risk of debt distress, or that have been assessed to have unsustainable debt, the G20

could consider conditioning DSSI access in 2021 on requesting and working toward a Fund

supported reform program aimed at reducing debt vulnerabilities and addressing debt levels where

needed. To facilitate this process, the Development Committee should consider asking WB and IMF

to develop by the end of 2020 a joint action plan for debt reduction for IDA countries with

unsustainable debt. All other currently DSSI eligible countries would remain eligible in 2021 without

further requirements. Broader issues would also need to be assessed in considering such an

approach, including potential market implications for other DSSI-eligible countries.

20. Moreover, the midpoint review would assess progress in DSSI implementation, such as

details on the debt service relief approved by participating institutions including those participating

as commercial creditors, developments in private creditor participation, and the monitoring of fiscal

policy responses to the pandemic including priority spending. It could also consider updated

assessments of the debt vulnerabilities of DSSI beneficiaries, developments in the international

framework for case-by-case sovereign debt resolution, together with any further steps appropriate

to promote a timely transition to deeper debt treatments by DSSI beneficiaries where needed.

21. Looking further ahead, a contingency clause in bonds and loans to promote

participation by the private sector in temporary debt service suspension could be considered,

including for potential inclusion in restructured debt. Such a clause could be modeled after

natural disaster clauses in bond contracts, which automatically suspend debt service payments in the

year of a disaster. A comparable contractual provision would trigger a debt service suspension on

contractually defined terms upon suspension of debt service by G20 official bilateral creditor (either

on its own, or possibly in combination with a natural disaster or major external shock). Unlike private

sector participation in the DSSI, such a clause would lead to private sector participation in an official

debt service suspension without requiring action by the debtor country and likely without triggering

rating downgrades, as the private sector debt service suspension would be governed by the debt

contract. The implications for borrowing costs would need further analysis. Private investors are less

inclined to invest in instruments whose repayment is conditional to possible reprofiling of another

class of debt on which they have no control and would price this new risk. If any such clause was


17

Official Use

adopted through new issuance, it would take time for such provisions to be reflected in the stock of

debt. One way to accelerate the adoption of such clauses would be to include them in bond

exchanges and loan refinancing for countries resolving debt to restore debt sustainability.

MONITORING OF SPENDING UNDER THE DSSI

22. The G20 endorsed the proposed IMF-WB framework for monitoring DSSI beneficiaries’

fiscal efforts in response to the crisis on June 23, 2020. The monitoring system reports fiscal

policy responses to the COVID-19 pandemic in the context of overall fiscal and economic activity

developments.19 It consists of a fiscal data table and a brief text commentary to complement and

explain the tabular information for each participating country, covering the authorities’ plans

reflected in supplementary/revised 2020 budgets or other budget (re-)allocation decisions, or the

latest fiscal projections if necessary. Information to be reported by the system includes: (i) aggregate

fiscal developments; (ii) the evolution of priority sector, social expenditure as well as recurrent and

development expenditure; (iii) COVID-19 related spending in response to the crisis; and (iv) debt

service suspension.20 When interpreting the results, it is important to keep in mind that COVID-19

related spending and priority spending in most cases overlap.

23. This section discusses early trends of fiscal efforts of 41 beneficiaries of the DSSI based

on the information provided by the endorsed monitoring system.21 The data for the system (the

table and text commentary) were jointly requested by the IMF country mission chief and WB country

director. The fiscal data reported are the change from the original 2020 budget (or the 2019

outcome) to the revised 2020 budget (or the latest staff projection for 2020 in case the revised

budget is not available), in local-currency-denominated inflation-adjusted terms, unless stated

otherwise. To facilitate aggregation of the data (either simple average or median), the change and

COVID-19 related spending are normalized by the 2020 GDP projection that was used for the

original budget. The numbers in Table 1 as well as a text chart should be interpreted as illustrative,

19Its details are presented in Section III in Annex II “Monitoring System of Fiscal Impact and Responses to the Crisis”

of the Third Update of the Debt Service Suspension Initiative prepared by the staff of the IMF and the World Bank.

20Clearly separating COVID-19 related spending and priority spending would be operationally difficult. Priority

spending may include some (but typically not all) COVID-related expenditure. Its definition varies country by country,

making comparisons difficult. Generally, it includes spending on education, health, and social protection/social

assistance. COVID-related spending would likely include spending on the prevention, containment, and management

of COVID-19 (including medical equipment as well as the direct fiscal cost of organizing and enforcing social

distancing) and COVID-19 related support to households, businesses, SOEs, and government entities (the coverage

depends on country-specific impacts and policy responses). Thus, not all COVID-19 related spending is included in

priority spending, while some COVID-19 spending—for instance, implemented through existing social

protection/assistance and health systems—may be included in priority spending.

21For the fiscal monitoring, information was requested for the 41 countries that were confirmed as formerly

requesting the debt suspension to the Paris Club or G20 as of July 31. The 100 percent submission rate validates the

effectiveness of the design of the DSSI fiscal monitoring system: drawing to the greatest extent possible on existing

reporting and public financial management mechanism, counting limited capacity in several low-income country

administrations. World Bank and IMF staff will continue to work with the authorities to further improve the

effectiveness of the fiscal monitoring system.


18

Official Use

because priority spending and COVID-19 related spending do not have the same coverage across

countries and countries follow different conventions for their fiscal years.

Table 1. Summary of Fiscal Policy Responses1

Change from Original Budget

to Revised Budget

(In percentage points of GDP

used for the original 2020

budget)

Share of Countries with Lower

Revenue (Higher Spending) in the

Revised Budget than the Original

Average Median (Percent)

Overall revenue -3.7 -1.8 90

Domestic revenue -3.9 -2.3 98

Grants 0.2 0.3 32

Overall spending -1.5 0.6 56

Recurrent spending 0.2 0.7 63

Development spending -1.6 -0.9 37

Priority/social sector spending2 0.9 0.6 85

of which,

Health 0.6 0.3 87

Education -0.1 0.0 41

Social protection 0.4 0.1 63

COVID-19 related spending 2.1 1.9 n.a.

of which,

Prevention, containment

and management

0.6 0.6 n.a.

Households 0.7 0.5 n.a.

Businesses, SOEs and

government entities

0.8 0.6 n.a.

1Change in absolute values from the original 2020 budget to the revised 2020 budget, with inflation adjusted and normalized by GDP

used for the original budget. Note that definition of priority spending and COVID-19 related spending varies by country, the values

presented in the table are interpreted only as illustrative. 2Countries were requested to report priority sector spending based on local definitions that pre-date the COVID-19 pandemic.

24. The COVID-19 pandemic and deep economic recession have put severe pressures on

the fiscal accounts of the DSSI beneficiaries. Such pressures occur on two fronts: first, increased

spending needs to mitigate the health, social, and economic impacts of COVID-19; second,

government revenue losses stemming from a sharp decline in economic activity and, for many

commodity exporters, a concurrent drop in commodity prices.

• The beneficiaries have devoted substantial resources to tackle the COVID-19 crisis. On

average, the beneficiaries are projected to spend 2.1 percent of GDP on COVID-19 related items

in 2020 (calendar or fiscal year). While there are major differences across beneficiaries, on

average, COVID-19 related spending has been broadly evenly allocated across three areas:

prevention, containment and management (share: 29 percent); support to households

(34 percent); and support to businesses, SOEs and government entities (36 percent). In the


19

Official Use

process of tackling the pandemic, countries have also boosted priority spending indicators

relative to the original budget by an average of 0.9 percentage points of (pre-COVID-19

budget/projected) 2020 GDP, mostly on health and social protection.22, 23

• Revenues were hit hard in a large majority of beneficiary countries with only partial

cushioning from increased grants. On average, overall revenue has declined by 3.7 percentage

points of (pre-COVID-19 budget/projected) 2020 GDP. This is driven by the sharp decline in

domestic (non-grant) revenue (3.9 percentage points), with almost all of beneficiaries having

lower domestic revenue, reflecting adverse effects of economic spillovers including the decline

in trade, commodity prices, tourism, and remittances as well as containment measures (e.g.,

lockdown). Increased grants (budgetary as well as in-kind grants, like medical equipment) from

the global community (0.2 percentage points) have only partly offset the decline in domestic

revenue.

25. In response to these pressures, the beneficiaries have made difficult choices to

reprioritize spending while allowing higher overall fiscal deficits.

• Substantial offsetting measures limit the average increase in overall spending, and many

countries are expected to reduce overall spending relative to the original budget. On

average, overall spending (including interest payments) is projected to decline. The overall

increase in recurrent spending averaging 0.2 percentage points of GDP is significantly below

COVID-19 related spending estimated at 2.1 percent of GDP, indicating that the beneficiaries

have substantially reprioritized recurrent spending.24 Development spending has also been cut

(on average, by 1.6 percentage points, with more than a half of the beneficiaries cutting it), with

potentially adverse long-term impacts on development.

• The overall fiscal deficit is expected to widen, on average, by 2.2 percentage points of

GDP. Although fiscal deficits have risen, it is notable that the increase is expected to be much

smaller than in advanced economies or emerging market economies with access to market

financing.25 As illustrated in Figure 4, for DSSI recipient countries, an increase in COVID-19

related spending (green bar), was made possible despite the fall in revenues (blue bar), by more

22Larger increase in COVID-19 related spending than priority spending partly reflects the different coverage of

priority spending and COVID-19 related spending (e.g., the latter includes spending on support for businesses, SOEs,

and government entities, and measures to promote and enforce lock-downs and social distancing which typically

would not be counted as health spending).

23Most countries benefitting from the DSSI have made commitments, in the context of their letters of intent for IMF

emergency financing (RFI/RCF), aimed at enhancing transparency in procurement and ex-post audits of COVID-19-

related emergency spending. For details, see Progress In Implementing The Framework For Enhanced Fund

Engagement On Governance, International Monetary Fund, July 2020.

24Also, lower net interest payments somewhat help reprioritize non-COVID-19 related recurrent spending. Net

interest payments, measured as the difference between the primary and overall balances, show on average a decline

of 0.4 percentage points of GDP (and its median is slightly lower than zero (-0.05 percentage points of GDP)).

25About 80 percent of the beneficiaries have larger overall deficits. Those beneficiaries with shrinking overall deficits

have cut spending, especially development spending.

https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/07/15/Progress-In-Implementing-The-Framework-For-Enhanced-Fund-Engagement-On-Governance-49576

https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/07/15/Progress-In-Implementing-The-Framework-For-Enhanced-Fund-Engagement-On-Governance-49576


20

Official Use

grants from donors (pink bar), together with lowering expenditure by reprioritization (orange

and brown bars), and by higher deficits (red bar).

Figure 4. Revenues, Expenditures (including COVID-related), and Fiscal Deficits 1/

(Contribution to support the priority spending,

in percentage points of GDP in the original budget, simple average)

26. The DSSI, together with other exceptional financing, is helping countries to respond to

the COVID-19 pandemic, and it would continue to do so if extended. Beneficiary countries have

increased COVID-19 related spending by an estimated 2.1 percent of 2020 (pre-COVID-19

budget/projected) GDP. Indicators of priority spending have increased by 0.9 percentage point on

average. Both these amounts exceed the liqudity support from DSSI in 2020 of US$5.0 billion

(0.4 percent of GDP).26 Other financing from the IMF, WB, and other MDBs, from bilateral donors

and other sources of new net borrowing has enabled countries to run larger deficits than envisaged

before the pandemic. Continuing elevated financing needs in 2021 (Section VI) would also benefit

from DSSI to help the poorest countries to safeguard COVID-19 related and priority spending.

26Based on creditor information.


21

Official Use

PUBLIC DEBT TRANSPARENCY

27. Enhanced transparency of public debt is a central part of the DSSI’s objectives to help

borrowing countries and their creditors make more informed borrowing and investment

decisions, which is critical in the current crisis context. In this light, DSSI beneficiaries have made

a commitment to disclose all public sector debt to IMF and WBG staff. This involves full disclosure of

external public and publicly guaranteed debt stocks by creditor and lending institution. The World

Bank and the IMF have therefore requested detailed loan by loan information on government debt

portfolios from debtor countries participating in the DSSI as well as information on debt service

suspended under the DSSI. To further enable stakeholders to track progress in the implementation

of DSSI and improve debt transparency, the World Bank also launched a DSSI website,27 which has

been frequently updated, and publishes information about participation status, debt sustainability

ratings, and potential debt service suspension amounts.28

28. Most beneficiary countries have provided information on debt service suspended and

more detailed information is expected to be received in the coming weeks. As of September

21, thirty two countries have provided detailed bilateral debt service payments falling due between

May 1 to December 31, 2020, including Afghanistan, Angola, Burkina Faso, Central African Republic,

Cabo Verde, Cameron, Chad, Comoros, Congo Rep, Congo Dem Rep., Côte d'Ivoire, Djibouti,

Dominica, Ethiopia, Gambia, Grenada, Kyrgyz Republic, Madagascar, Mali, Maldives, Mauritania,

Mozambique, Myanmar, Nepal, Niger, Pakistan, St. Lucia, Senegal, Sierra Leone, Togo, and Zambia.

For these countries, the total debt service under the DSSI is estimated at US$4.8 billion.29 Angola and

Pakistan account for more than 56 percent of this amount. The remaining amount of debt service

under the DSSI for the eleven countries, according to creditors’ data, is estimated at US$854 million,

with the Yemen, Rep. accounting for 42 percent of this amount. More detailed information about

the PPG external debt on a loan-by-loan basis is expected to be received from each beneficiary

country, which requested more time to provide comprehensive and accurate data of their debt

portfolios. Estimates of debt service savings provided by creditors and borrowing countries differ

significantly in a few countries. Possible explanations for the differences in the estimates of debt

service deferred include: (i) different effectiveness dates for DSSI payment deferrals by some

countries which joined the initiative at a later stage and the treatment of bilateral lending

27https://www.worldbank.org/en/topic/debt/brief/covid-19-debt-service-suspension-initiative?cid=EXT_WBEmailShare_EXT

28Potential debt service suspension amounts are estimated as debt service on debt outstanding and disbursed as of

end 2018 on public and publicly guaranteed debt by official bilateral creditors as compiled in the IDS.

29This compares to US$8.8 billion of potential debt service savings as estimated by the World Bank’s International

Debt Statistics (IDS). Key differences arise from: (i) lender participation covered under the DSSI, especially with

respect to the treatment of national policy banks in countries not included in the Paris Club group of creditors; (ii)

perimeter of claims, since the DSSI also includes debt service on non-guaranteed debt; (iii) vintage of data in IDS, as

the potential debt service is projected based on the disbursed and outstanding long-term external debt at end 2018

net of principal and arrears; and (iv) differences in exchange rate and interest rate assumptions. The debt service

provided by PNG do not have enough detail to be included in the total.

https://www.worldbank.org/en/topic/debt/brief/covid-19-debt-service-suspension-initiative?cid=EXT_WBEmailShare_EXT


22

Official Use

instruments reflecting ongoing discussions among governments and creditors; and (ii) exchange

rate assumptions; and (iii) discrepancies in debt data and reporting.30

29. The IMF and the World Bank staff are working with DSSI eligible countries to enhance

debt recording and reporting throughout FY21. In the context of the IMF-World Bank

multipronged approach to address debt vulnerabilities in low-income and emerging market

economies, technical assistance and operational engagements to enhance public debt recording

and reporting in borrowing countries have been scaled up. An upcoming IMF COVID-19 Special

Series note will provide specific methodological guidance on recording DSSI-related operations in

both external sector and government finance statistics. Enhanced public debt reporting will also be

supported in FY21 through the implementation of the World Bank’s Sustainable Development

Finance Policy (SDFP).

30. Creditors can also play an important role in supporting debt disclosure. The Diagnostic

Tool on the Implementation of the G-20’s Operational Guidelines for Sustainable Financing,

developed by Bank and Fund, identifies publishing loan-by-loan information, including terms, on a

single website and regular updates on new lending as a strong practice with respect to debt

reporting in support of information sharing and transparency (guideline 2). The Institute of

International Finance (IIF) Voluntary Principles for Debt Transparency set out a framework for private

lenders to disclose information about their lending to sovereigns. Still, disclosure of amounts and

terms of public debt data by most creditors is limited. Creditors can further support debt

transparency by refraining from excessively using confidentiality clauses as well as other legal

provisions in loan contracts that undermine transparency, such as the use of undisclosed or hidden

escrow arrangements and the use of procurement arrangements that avoid, or are not consistent

with, the procurement rules of borrowing countries and which are not properly disclosed. Also, it is

important that public debt transparency is based on a comprehensive concept of public debt,

including information on swap lines, and that it extends to borrowing terms, including information

related to collateral.

NON-CONCESSIONAL BORROWING UNDER DSSI

31. Each DSSI beneficiary country has committed to contract new non-concessional debt

during the suspension period only if such lending is in compliance with limits agreed under

the IMF Debt Limit Policy (DLP) or WBG policies on non-concessional borrowing. IMF and WBG

staff clarified in the second DSSI update report (see summary in Annex II) that the DSSI does not

impose any debt ceiling other than those required under the IMF DLP or the World Bank’s

Sustainable Development Finance Policy (SDFP) which entered into effect on July 1, 2020.31 These

debt ceilings are aligned with the debt risks facing a country, thereby serving to help contain debt

vulnerabilities, consistent with DSSI goals.

30See G20 note on Public Sector Debt Definitions and Reporting in Low Income Developing Countries.

31It may be useful to clarify this language should the G20 term sheet be amended.

https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/02/11/Public-Sector-Debt-Definitions-and-Reporting-in-Low-Income-Developing-Countries-49042


23

Official Use

32. The IMF and World Bank limits that are applicable to DSSI participating countries

during the debt service suspension period from May 1, 2020 to December 31, 2020 are

summarized in the Debt Limits Conditionality table.32 For countries that use the LIC DSF, with the

exceptions of Mauritania and Cameroon which have exemptions for specific projects (in line with the

DLP), all countries assessed at high risk of debt distress have a zero non-concessional borrowing

limit under the Fund-supported program. The World Bank’s SDFP normally sets a zero non-

concessional borrowing ceiling for countries within this high-risk group unless the country has a

debt ceiling under an IMF program or if the country has access to borrowing on market terms. For

market-access countries, ceilings would take debt management objectives into account and would

be calibrated to support a reduction in debt vulnerabilities.

33. DSSI beneficiaries have observed IMF borrowing limits. Compliance with IMF borrowing

limits can typically only be verified with a delay, for instance in the context of a program review. Due

to the considerable uncertainty regarding the duration and the scale of the pandemic and the

practical constraints on conducting comprehensive discussions with the authorities among the

pandemic, timely augmentation of access under existing ECF arrangements was not feasible in many

countries cases and countries financing needs in light of the global health crisis were largely met

through RCF/RFI, which have no ex post conditionality including debt limits. Having said that, since

March 13, 2020, there have been no non-observance of non-concessional borrowing limits in

program review reports of DSSI beneficiaries that have been considered by the IMF Executive

Board.33 In two cases the debt limits have been revised: (i) Cabo Verde’s concessional borrowing

limit was modified in line with the revisions to the macroeconomic framework, but this occurred

before COVID-19; and (ii) Senegal’s nominal public debt limit under the PCI was revised upward in

response to COVID-19.

34. Reviews of seven country cases by the World Bank’s Non-Concessional Borrowing

Policy (NCBP) Committee showed that all but one country complied with the relevant limit on

non-concessional borrowing (NCB). Comoros, Ethiopia, Mozambique, and Tajikistan complied

with the zero NCB in FY20. Uganda, a country at low risk of debt distress at the time, requested

and was granted a non-zero NCB. Tanzania also considered to be at low risk of debt distress

contracted NCB. On the other hand, the Maldives, despite having a zero NCB ceiling, borrowed in

non-concessional terms to address COVID-19 emergency response. The Maldives, however, are

implementing the Committee’s recommendations. With the replacement of the NCBP by the SDFP

32The Debt Limits Conditionality table is available through this link.

33A total of seven Upper Credit Tranche and Policy Coordination Instrument reports have been considered for DSSI-

participants. Sierra Leone’s breach of a concessional borrowing limit related to borrowing conducted in August 2019

for which a waiver was granted by the IMF Executive Board in April 2020 and the authorities refrained from external

borrowing subsequently in 2019.

https://www.imf.org/external/np/spr/2015/conc/jointDLC.xlsx


24

Official Use

at end June 2020, the remaining cases transited to the SDFP and will inform the SDFP’s Committee

recommendations for FY21.34

LIQUIDITY NEEDS AND DEBT SUSTAINABILITY

35. This section presents an analysis of the liquidity needs of DSSI countries and

developments regarding debt sustainability.35 The liquidity analysis considers both external

financing needs and their fiscal financing needs, drawing primarily on data and projections from the

most recent vintage of the October World Economic Outlook (WEO).36 It provides an update on

market financing for these countries and makes an overall assessment of their need for liquidity

support. It also gives an update on debt and debt service indicators and on developments in debt

sustainability assessments after about six months of the COVID-19 pandemic, which show a marked

deterioration.

Financing Needs

36. Key drivers of external financing needs are expected to remain high in 2020ꟷ21.

Current account balances are projected to deteriorate sharply in most DSSI countries in 2020, falling

by an average of 3.5 percent of GDP, as exports and remittances fall more sharply than imports.

External imbalances partially unwind in 2021,

by some 1.5 percent of GDP, as a projected

partial recovery in external demand is coupled

with subdued domestic demand growth, in

part reflecting some assumed fiscal

consolidation. DSSI countries have estimated

public and publicly-guaranteed (PPG) external

debt service due in 2021 of US$43 billion

(about 2½ percent of GDP for an average DSSI

country), similar to 2020.37 This includes

$15.9 billion due to official bilateral creditors,

$13.5 billion to multilateral creditors, and

$13.6 billion to private creditors.

34The SDFP was approved by the World Bank Board on June 9, and the policy became effective on July 1st, 2020. Out

of the current 74 IDA-eligible countries, 56 are required to prepare Performance and Policy Actions (PPAs) for the

fiscal year (FY) 21, 39 of which are FCS or Small States. All PPAs agreed in the context of the SDFP are expected to be

finalized by October 31, 2020.

35DSSI countries in this section refers throughout to DSSI eligible countries.

36Findings are broadly consistent with the World Bank’s Macro-Poverty Outlooks.

https://www.worldbank.org/en/publication/macro-poverty-outlook.

37Debt service data from the World Bank’s IDS. Debt service due could be somewhat higher due to net borrowing in

2019-20 which is not captured by the IDS series used for this analysis. Sixty-eight of the 73 DSSI-eligible countries

have DRS data on debt service. Kiribati, Marshall Islands, Micronesia, South Sudan, and Tuvalu do not have data.

https://www.worldbank.org/en/publication/macro-poverty-outlook


25

Official Use

37. External financing pressures are

projected to remain elevated in 2021,

with reserve cover deteriorating notably.

External financing needs (EFNs) are

projected to expand to an average of

9.2 percent of GDP (equivalent to a total of

US$179 billion) among DSSI countries this

year, well above their average of 4.3 percent

of GDP (a total of around US$90 billion per

annum) in 2015ꟷ19.38 The expected partial

unwinding of the current account

deterioration, along with a projected

recovery in FDI, would help reduce EFNs in

2021 to an average of 7 percent of GDP (equivalent to a total of US$144 billion) among DSSI

countries. Nonetheless, this external financing need remains elevated by historical standards, at

some US$54 billion above the average in 2015ꟷ19. At the same time, DSSI countries’ FX reserves are

projected to fall by around $22½ billion collectively in 2020, leaving half of them with less than

2-years EFNs coverage (and a handful of them with less than full-year EFNs coverage). In

comparison, the share of DSSI-eligible countries with FX reserves less than 2-years EFNs coverage

was 30 percent in 2018.

Figure 5. External Financing Needs

(In percent of GDP)

38External financing needs are calculated as current account balance + capital account balance + external debt

amortization – net FDI inflows. These are calculated for 53 out of 73 countries for which data is available from the

WEO. The overall EFN estimate is derived by extrapolating to cover the countries for which data is not available.

0%

10%

20%

30%

40%

50%

60%

70%

80%

>200% 100% - 200% <100%

Sh

are

of

DS

SI

cou

ntr

ies

FX Reserves Coverage of Next-year's

EFNs

2018 reserves / 2019 EFNs 2020 reserves / 2021 EFNs

FX Reserves Coverage of Next-year's EFNs


26

Official Use

38. DSSI countries’ fiscal gross financing needs (GFN) are also projected to remain high in

2021 despite some easing in fiscal deficits.39 Their fiscal deficits are projected to widen to an

average of 6½ percent of GDP in 2020 (cf. 2⅔ percent of GDP in 2015-19) as revenues fall and

spending needs rise. Taking into consideration the debt amortization due, the average fiscal GFN in

2020 is projected at 11.5 percent of GDP. For 2021, IMF staff projects deficits to narrow by an

average of 2 percentage points as revenues benefit from the projected growth recovery and

emergency spending needs ease somewhat. Even so, fiscal GFNs are projected to remain high at an

average 10 percent of GDP in 2021, compared with about 7.4 percent in 2015-19, an excess

equivalent to US$58 billion.

39. Countries with pre-existing vulnerabilities face additional challenges. DSSI-eligible

countries currently assessed to be at high risk or in debt distress, have on average GFN-to-GDP and

EFN-to GDP ratios higher than the other debt risk groups (Figures 6.a and 6.b).

Figure 6. Estimated Fiscal and External Gross Financing Needs

(Average by debt risk group; in percent of GDP)

Figure 6.a GFN/GDP Figure 6.b EFN/GDP

Source: WEO October 2020 and LIC DSA Database as of End-July, 2020.

Financing Conditions and Liquidity Support Needs

40. Meanwhile, financing conditions—both international and domestic—may well remain

tight for most DSSI countries (Annex III). Very few DSSI countries have been able to tap

international capital markets (through Eurobonds or syndicated loans) since the pandemic started,

as sovereign spreads of most frontier markets remain wide despite having declined partially from

39Fiscal gross financing needs are calculated as overall fiscal deficit + government debt amortization. These are

calculated for 68 out of 73 countries for which data are available from the WEO and LIC DSA databases. The overall

estimate for the GFN is derived by extrapolating to cover the countries for which data are not available.

0

2

4

6

8

10

12

14

Low Moderate High

Gross Financing Needs

(Average, in percent of GDP)


27

Official Use

their peak.40 Presently, only 4 DSSI countries are rated B or higher while trading at spreads below

600 basis points.41 Domestically, reflecting the relatively low level of financial development, the

capacity of local banks to absorb higher government borrowing is generally modest in DSSI

countries. Further, the scope to mobilize additional revenues is limited under still weak economic

conditions.

41. Overall, needs for liquidity support needs are expected to remain elevated in 2021.

External and fiscal financing needs are estimated at about 7 percent and 10 percent of GDP,

respectively, staying well above recent historical norms by about US$54-58 billion. After receiving

emergency financing in the first half of 2020 from the IMF and increased lending by MDBs, many

DSSI countries are expected to continue seeking additional financing in 2021 from the IMF under

longer-term programs, coupled with support from the WBG and other MDBs.

42. The extension of the DSSI by up to one year would make a substantial complementary

contribution to meeting these liquidity needs given the limited availability of new financing.

According to the World Bank’s International Debt Statistics (IDS) debt service on official bilateral

loans would be in the order of up to US$15.9 billion in aggregate for all DSSI-eligible countries in

2021, roughly 30 percent of their overall financing needs. By releasing resources equivalent to up to

about 0.9 percent of GDP on average for these countries, DSSI extension helps deter potential cuts

in priority spending that could impair economic recovery in the short-term and undermine long-

term developmental goals. A full-year extension would provide not only additional debt service

savings, but also facilitate budget planning during this time of heightened uncertainty and allow

time for reform programs aimed at reducing debt vulnerabilities and addressing debt levels where

needed, to be developed and implemented with the Bank and Fund in the cases where this is

necessary.

Debt Developments and Debt Sustainability

43. The public debt outlook has deteriorated sharply across the globe owing to the

pandemic, including in DSSI-eligible countries. The latest WEO projects the average debt-to-GDP

ratio in DSSI-eligible countries at 57 percent of GDP in 2020 up by 7 percentage points from 2019.42

This is similar to the increase in EMs of 9 percentage points, but well below the 15 percentage-point

increase in AEs (Figure 7). The average debt level in DSSI countries is projected to remain around

this higher level over the next five years. A large portion of the deterioration in debt ratios reflects

the sharp falls in GDP, the effect of which is amplified as fiscal revenue declines widen fiscal deficits.

The somewhat smaller debt ratio increase in DSSI-eligible countries, at least in comparison with AEs,

mostly reflects the smaller fiscal space for budgetary measures to cushion the crisis, even with the

support provided by emergency financial assistance and debt initiatives under the DSSI and CCRT, in

40Honduras (B1/BB-/) was the only DSSI country that has returned to the Eurobond market ($600 million, 5.625%)

since the pandemic, while few other countries received syndicated loans of smaller amounts.

41There has been no issuance by a CCC+ or lower rated countries and very limited issuance at spread above 600 bps

during the past 20 years.

42This is similar to the World Bank’s MPO data.


28

Official Use

part reflecting the limited market access of those countries since the pandemic started. All country

groups among DSSI-eligible countries show similar debt trajectories with the debt-to-GDP ratio

peaking in 2020 and 2021 before declining in the medium term.

44. Many DSSI-eligible countries entered the COVID-19 crisis with high debt

vulnerabilities, which increased in the first half of 2020.

• Thirty-four out of the 66 DSSI-eligible countries (52 percent) that use the LIC DSF are now

assessed at a high risk of debt distress or in debt distress, up from 48 percent as of end-2019

(Figure 8).43 Since the onset of COVID-19, debt distress ratings were downgraded for five

countries for which Bank-Fund staff use the LIC-DSF (Kenya, Rwanda, Papua New Guinea,

Madagascar, and Zambia) and one was upgraded (Gambia) (Table 2).44 The downgrades largely

related to the worsened macroeconomic outlook amid the pandemic. Zambia has been hit hard,

exacerbating an already difficult economic situation. As a result, the authorities announced their

intention to restructure their debt in May triggering a downgrade to “in debt distress”.

• Most of the updated LIC DSAs were prepared in the context of the provision of emergency

financing in the early stages of the pandemic during April-June 2020, when the effects of the

pandemic on the economy and public finances were likely not yet fully reflected because of the

highly uncertain outlook.

• Based on the IMF’s debt sustainability analysis for market access countries (MAC DSA), four of

seven DSSI-eligible countries with access to international capital markets were facing high debt

43Looking at the broader sample of LICs that use the LIC DSF, 38 out of 70 low-income countries (54 percent) are now

assessed at a high risk of debt distress or in debt distress up from 51 percent as of end-2019. For the LIDC group

(which excludes the high-income disaster-vulnerable small states and some recent PRGT graduates), 47 percent of

countries are at high risk or in debt distress up from 44 percent at end-2019.

44The Gambia’s upgrade from an “in debt distress” rating to a high risk of debt distress is related to the finalization of

a restructuring agreement. Also, the downgrade of Senegal’s risk rating preceded the onset of COVID-19.

Figure 7. Development of Public Debt (2009–24)

Debt-to-GDP Ratio (Average, % of GDP) Debt-to-GDP Ratio

DSSI-eligible Countries (Average, % of GDP)

Source. WEO


29

Official Use

vulnerabilities even before the crisis (Angola, Pakistan, Mongolia, and St. Lucia). The MAC DSA

heat maps used for these countries indicated high risks for both solvency (debt-to-GDP ratio)

and liquidity (public gross financing needs) indicators. The pandemic and resultant larger

financing needs are further exacerbating the difficult macroeconomic and debt outlook. For

instance, Angola has initiated debt reprofiling discussions with some of its creditors. Other DSSI-

eligible countries with market access (Fiji, and Nigeria) are also projected to experience a

worsening debt path due to the pandemic.

Figure 8. Evolution of Risk of External Debt Distress

(in percent of DSSI-eligible countries with LIC DSAs)

Note: 66 out of 73 DSSI-eligible countries apply the LIC DSA. Countries for which a new DSA has not been prepared retain the

same risk rating until a new DSA is prepared. The ratings for Burundi (2015) and Guinea-Bissau (2018) are based on dated DSAs.

Yemen and Zambia are in debt distress based on announcements of accumulation of arrears and restructuring, respectively.

Table 2. Recent Changes in the Risk Rating Under the LIC DSF (since end-2019)

Source. LIC DSAs.

Note: D: in debt distress (orange), H: high (red), M: moderate (yellow), L: low (green). Blank years reflect the rating assigned in

the latest DSA available at that time. * As of September 21, 2020.


30

Official Use

45. Some countries’ growing solvency concerns are compounded by liquidity pressures:

• Reflecting the deteriorating macroeconomic outlook, solvency and liquidity indicators have

worsened in DSSI-eligible countries that use the LIC-DSF compared with indicators from before

the COVID-19 pandemic. It is notable that the magnitude of the threshold breaches has

increased for some countries and for others the space to the threshold has narrowed for

high-risk and in-debt-distress countries since the pandemic, while the distance to the threshold

has declined for many low- and moderate-risk countries (Figure 9).

Figure 9. Key Debt Ratios Relative to Thresholds for Pre and Post COVID Periods 1/

External PPG Debt-to-GDP

Magnitude of breaches of the thresholds

(high-risk / in debt distress countries)

Space to the thresholds

(low- and moderate-risk countries)

External PPG Debt Service-to-revenue

Magnitude of breaches of the thresholds

(high-risk / in debt distress countries)

Space to the thresholds

(low- and moderate-risk countries)

1/ For countries in debt distress and high risk, the data points reflect the magnitude of breaches. For moderate and low risk

countries, the data points reflect the distance to the threshold. Green and red dots represent improvements and deteriorations,

respectively.


31

Official Use

• Of 14 countries with protracted breaches of solvency indicators under the baseline (defined as

breaches of solvency indicators over 5 years and more), 12 are accompanied by protracted

breaches of liquidity indicators.45 Similarly, as highlighted in the most recent IMF staff reports on

these countries, two eligible market access countries (Pakistan and St. Lucia) are projected to

breach the benchmarks for both debt-to-GDP and gross financing needs for almost the entire

projection period (5 years).

• For the countries with deteriorating solvency indicators coupled with immediate liquidity

pressures, a more extended suspension of debt service would be helpful to contain distress that

could impair their capacity to address the pandemic (Box 2). Fundamental measures to

strengthen debt sustainability would also be required including fiscal consolidation and reforms.

• External debt service-to-revenue ratios and external debt service-to-export ratios for countries

with protracted breaches of both solvency and liquidity indicators are on average larger in the

medium term than for countries that do not have protracted breaches. This highlights that while

an extension of the DSSI could provide useful breathing space for the latter group of countries,

countries in the former group would probably need a more comprehensive solution taking

advantage of the time provided by a DSSI extension.

Addressing Unsustainable Debt

46. Amid worsening solvency concerns, more countries may face unsustainable debt

burdens. In several countries, debt sustainability is contingent on the authorities’ commitment to

steep and prolonged fiscal adjustment and investment reprioritization, which will be difficult to

achieve in the current crisis context. While some COVID-19 measures are intended to be unwound

over the course of 2021, there is nevertheless a risk of countries tipping into unsustainable debt

situations, especially if the COVID-19 shock is more protracted and deeper than envisaged in

macroeconomic frameworks underlying the DSAs. Some countries could require a strong and

comprehensive debt treatment that provides, together with sound policies, a return to a path of

sustained inclusive growth.

47. Given the exceptional circumstances, creditors should pursue a case-by-case approach

to ensure debt burdens remain sustainable and achieve debt stock reduction where it is

needed during the extension of the DSSI. The case-by-case approach, informed by IMF-World

Bank DSAs, would focus restructuring efforts on countries with unsustainable debt. Official creditors

can incentivize the debtor to seek and obtain comparable treatment from their private creditors. In

the current low growth environment, a permanent reduction in nominal debt stock may be needed

to achieve a sustainable debt burden in low income countries hit the hardest.

45The LIC DSF assesses the risk of debt distress based on two solvency indicators (present value of PPG external debt-

to-GDP ratio and PV of PPG external debt-to-exports ratio) and two liquidity indicators (debt service-to-exports ratio

and the debt-service-to-revenue ratio).


32

Official Use

48. Speedy and efficient debt resolution depends on timely recognition of sustainability

problems. A country facing solvency problems should seek comprehensive debt restructuring as

soon as feasible to avoid a repetition of “too-little-too-late” debt restructurings seen in recent years

which ultimately prolonged and deepened the economic cost of the needed restructuring. But the

Paris Club countries with well-established procedures for debt restructuring now account for a small

portion of the debt of countries assessed to be in debt distress or at high risk of debt distress in

2018 (Table 3) owing to the rise in commercial debt and non-Paris Club bilateral debt.

49. Enhanced creditor coordination, led by the G20 which includes Paris Club and non-

Paris Club creditors, would limit the risk of delays. The DSSI implementation clearly indicates that

46The 2020 DSSI provides an NPV-neutral debt rescheduling with a one-year grace period and four-year maturity,

using the interest rate set in the original loan contract.

Box 2. Debt Service Profile and the Terms of Suspension

Some countries have large debt service in the medium term beyond 2021, potentially reducing the

efficacy of a rescheduling under the DSSI. Based on end-2018 data from the World Bank’s IDS database,

debt service on existing debt of DSSI countries are projected to peak in 2021 (spread broadly evenly between

the first and second half of the year), but would go up again in 2024, inter alia, for frontier economies largely

due to bond redemptions. Several of these countries have been downgraded recently and Senegal and

Ethiopia have been put on negative outlook by major rating agencies, signaling increasing rollover risks and

negative implications for borrowing costs. Payments due on outstanding Eurobonds of the frontier DSSI

countries will increase to $7.4 billion in 2021 and $8.3 billion in 2022 (vs. $5.7 billion in 2020), and further to

$12 billion in 2024. Such bunching of maturities in some countries in the medium term might diminish the

efficacy of the DSSI, if provided with the same rescheduling terms,46 and deter some countries from applying

for the DSSI in light of debt management considerations.

Providing more options for DSSI rescheduling terms could be considered to avoid exacerbating debt

service burdens in the coming years. Given its NPV-neutrality, it would be useful for G20 creditors to

consider providing options to eligible countries so that principal repayments under the DSSI do not overlap

with large debt service. For instance, the risk of breaches of DSA thresholds could be reduced through a

flexible grace period (e.g. up to four years) with the same repayment period of three years. A rescheduling

will be NPV-neutral with a longer grace period as long as the original interest rate in the underlying loan is

used for the rescheduling interest rate. Alternatively, the grace period can be maintained, and the repayment

period extended (e.g., up to six years). Countries with large bond redemptions should be engaged in

proactive debt management once they re-establish global market access, for example, through pre-emptive

debt exchanges or debt buy-back to smooth out future humps in debt services.

0

2000

4000

6000

8000

10000

12000

14000

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Payments due on FX bonds (US$mn) 1/

Principal Interest

1/ Captures the 23 DSSI eligible countries that have issued under foreign laws.


33

Official Use

comprehensive debt reconciliation and information sharing among creditors, as well as clarity

around participating creditor institutions and treated debt, are critical. Debt restructuring would also

need to involve commercial creditors by requiring comparable treatment.

Table 3. Public Debt Composition for Countries Assessed to be in Debt Distress

or at High-risk of Debt Distress (Average share in percent, 2018)

Multilateral Paris Club Non-Paris

Club Commercial

In debt distress 35 14 33 18

High risk of debt distress 48 4 32 16

Source. World Bank International Debt Statistics

RECOMMENDATIONS

50. As the pandemic continues to spread and its consequences for the global economy

remain uncertain, an extension of the DSSI of up to one year, with the second six months

subject to confirmation in a mid-term review, would support the poorest countries in

implementing appropriate policies. Projections for external and fiscal financing requirements

remain high in these countries in 2021. At the same time, their financial buffers are deteriorating and

they have not enjoyed the same recovery in financial market conditions that has benefitted many

emerging market countries, in part reflecting concerns about rising debt vulnerabilities. Hence, it is

critical to extend the DSSI, which, by deferring official debt service of up to about US$16 billion in

aggregate for all DSSI-eligible countries (or about US$12 billion for current DSSI participants),

releases financing to support these countries in mitigating the severe adverse health, social, and

economic impacts of the pandemic. A full year extension would provide more certainty to DSSI

countries formulating their 2021 budgets helping them take appropriate measures in the face of a

more uncertain macroeconomic outlook. The second six months would be subject to confirmation in

a mid-term review.

51. In addition to extending the DSSI until end-December 2021, the G20 should take steps

to improve its efficiency in supporting the efforts of beneficiary countries in mitigating the

impact of the COVID-19 pandemic:

• First, to maximize much needed support to eligible countries, all official bilateral creditor

institutions should be encouraged to implement the DSSI in a transparent manner. The

implementation of DSSI can be made more efficient by (i) clarifying the participation of lending

institutions such as by publishing an agreed list; (ii) utilizing a common MOU to guide the

implementation of DSSI, and publishing the MOU to ensure a common understanding between

debtors and creditors;

• Second, the common MOU should provide clear debt transparency and public debt disclosure

requirements which extend to the terms and conditions of public debt (including collateral as

feasible) and which are based on a comprehensive statistical definition of public debt.


34

Official Use

• Third, making a timely decision to extend the DSSI, which enables requests for DSSI in 2021 to

come even before end 2020; and

• Fourth, adopting common procedures for country requests and other communications that

ensure the IMF-WBG are fully informed about any delays in processing DSSI requests.

• Fifth, to maximize the ability of DSSI beneficiaries to continue providing extraordinary pandemic

support to individuals and firms through health, social and economic spending, and in the spirit

of fairness, G20 countries should take all possible steps to urge participation in DSSI by all

private sector creditors under their jurisdiction, as well as by all bilateral public sector creditors,

regardless of whether they are considered official bilateral, commercial or policy banks.

• Sixth, considering the existing DSSI repayments due in 2022-24, and the peaks in debt service

schedules of the eligible countries, the G20 should also consider providing options for

rescheduling terms while maintaining NPV neutrality, such as a longer grace period (up to four

years) or a longer repayment period (up to six years), so that DSSI repayments do not

exacerbate the peaks in debt service burdens and add to the challenges these countries face in

managing their debt and debt service.

• Seventh, continued fiscal monitoring remains appropriate in 2021 to help ensure priority

spending is protected to contain the longer-term economic and social costs from the pandemic

and thereby support sustainability.

52. The G20 could also give consideration to the feasibility of modifying the design of

DSSI in a targeted manner to ensure the DSSI addresses financing needs and supports an

expeditious resolution of debt sustainability challenges. With debt vulnerabilities increasing,

there are likely to be increased cases where debt becomes unsustainable. Allowing delays in the

recognition of unsustainable debt would only deepen the difficulties that countries may face in the

future. This suggests a need to bring in some safeguards to address debt sustainability risks. Most

current DSSI participants would remain eligible in 2021 without further requirements. However, for

the subset of countries with high debt vulnerabilities, the G20 could consider conditioning DSSI

access in 2021 for countries at high risk of debt distress, or countries that have been assessed to be

in an unsustainable debt situation, on requesting and working toward an IMF financing program

aimed at reducing debt vulnerabilities and addressing debt levels where needed, which could

provide such safeguards in a manner that protects participation in DSSI given the still-high financing

needs of eligible countries. Broader issues would also need to be assessed in considering such an

approach, including potential market implications for other DSSI-eligible countries. In addition, DSSI

extension would be subject to a midterm review, which would assess progress in DSSI

implementation together with any further steps appropriate to promote a timely transition to

deeper debt treatments by DSSI beneficiaries where needed. To facilitate the efficient

implementation of sovereign debt resolution, the Development Committee should consider asking

the IMF and WB to develop by the end of 2020 a joint action plan for case-by-case debt

restructuring in countries with unsustainable debt. It is important that public debt transparency is


35

Official Use

based on a comprehensive concept of public debt, including information on swap lines, and that it

extends to borrowing terms, including information related to collateral.

53. Building on the DSSI, the G20 could facilitate more timely, efficient, and

comprehensive sovereign debt resolutions, including for countries outside the DSSI perimeter

to the benefit of debtor countries and the global economy. Some countries could require a

strong and comprehensive debt treatment that provides, together with sound policies, a return to a

path of sustained inclusive growth; indeed, a deep reduction in nominal debt stock may be needed

to achieve a sustainable debt burden in low income countries hit the hardest.

54. Improvements in coordination among the major official creditors and clear

expectations for involving the private sector could yield major economic and social benefits

by reducing the duration of the restructuring process and ensuring that restructuring is

broader and more durable. Accordingly, it is important that G20 creditors agree to coordinate in

an efficient manner by determining principles that will guide their approach in specific country

cases, such as in relation to the treatment of other creditors including commercial creditors, and on

equitable burden sharing among G20 creditors. Drawing on the example of the DSSI, it could be

useful for the G20 creditors to consider the adoption of a term sheet for sovereign debt resolution

during the pandemic.

55. Strengthening debt management and debt transparency should be top priorities. With

the current uncertain outlook for global growth, debt service needs to be carefully managed even

for countries where debt remains sustainable. The World Bank–IMF multi-pronged approach

provides a critical and comprehensive framework to help countries address debt vulnerabilities. In

this regard, a forthcoming Board paper will lay out a holistic framework to strengthen debt

management and help reduce vulnerabilities, including through capacity development to enhance

recording and reporting. The World Bank will continue efforts to promote debt transparency,

including increasing the level of detail included in the International Debt Statistics and encouraging

Bank borrowing countries to transparently report on debt stocks and flows. The IMF and the World

Bank will continue to encourage both creditors and debtors to provide full disclosure of the terms of

debt restructuring, including of the rescheduling of any DSSI eligible debt.


36

Official Use

Annex l. DSSI Eligibility and Participation

All DSSI eligible countries are listed. The 43 countries that have requested to participate as of

September 18, 2020 are denoted by an asterisk (*).

AFRICA

Angola* Benin Burkina Faso*

Burundi* Cameroon* Cabo Verde*

C.A.R.* Chad* Comoros*

Congo, Democratic Rep. of* Congo, Republic of* Cote d’Ivoire*

Ethiopia* Gambia, The* Ghana

Guinea* Guinea-Bissau Kenya

Lesotho* Liberia Madagascar*

Malawi* Mali* Mauritania*

Mozambique* Niger* Nigeria

Rwanda Sao Tome and Principe* Senegal*

Sierra Leone* Somalia South Sudan

Tanzania* Togo* Uganda*

Zambia*

EAST ASIA

Cambodia Fiji Kiribati

Lao, PDR Marshall Islands Micronesia

Mongolia Myanmar* Papua New Guinea*

Independent State of Samoa* Solomon Islands Timor-Leste

Tonga* Tuvalu Vanuatu

SOUTH ASIA

Afghanistan* Bangladesh Bhutan

Maldives* Nepal* Pakistan*

EUROPE AND CENTRAL ASIA

Kosovo Kyrgyz Republic* Moldova

Tajikistan* Uzbekistan

LATIN AMERICA AND CARIBBEAN

Dominica* St. Vincent Grenada*

Guyana Haiti Honduras

Nicaragua St. Lucia*

MIDDLE EAST AND NORTH AFRICA

Djibouti* Yemen, Republic of*


37

Official Use

Annex ll. Non-concessional Borrowing in the Context of the DSSI

A request for DSSI does not impose any new or additional limits on non-concessional borrowing

to those that are already applicable under existing IMF arrangements or under applicable World

Bank/IDA debt limit policies:

• When a country has an IMF-supported adjustment program, the debt limits prevailing under the

program are the debt limits consistent with the DSSI. The absence of a debt limit in an IMF

supported arrangement implies that no limit is required by the DSSI.

• From July 1, 2020 onward, all IDA countries will be subject to the Sustainable Development

Finance Policy (SDFP). The SDFP is intended to incentivize IDA-eligible countries to move toward

transparent and sustainable financing. In particular, countries will implement concrete

Performance and Policy Actions (PPAs) to (i) strengthen debt transparency; (ii) enhance fiscal

sustainability; and (iii) strengthen debt management. Examples of PPAs to foster debt

transparency include disclosure of loan contract terms and payment schedules. Enhancing debt

transparency will be critical to make sure additional fiscal space has significant development

impacts.

Countries that are not required to have non-concessional borrowing ceilings under an IMF program

or the SDFP will not need to implement ceilings under the DSSI.


38

Official Use

Annex lll. Debt Service Suspension Initiative—Term Sheet

Scope of Beneficiary Countries

All IDA-countries and all least developed countries as defined by the United Nations, that are current

on any debt service to the IMF and the World Bank.

Setting the Right Incentives

Access to the initiative will be limited to countries which:

(i) have made a formal request for debt service suspension from creditors, and;

(ii) are benefiting from, or have made a request to IMF Management for, IMF financing including

emergency facilities (RFI/RCF).

Each beneficiary country will be required to commit:

• to use the created fiscal space to increase social, health or economic spending in response to

the crisis. A monitoring system is expected to be put in place by the IFIs;

• to disclose all public sector financial commitments (debt),1 respecting commercially sensitive

information. Technical Assistance is expected to be provided by the IFIs as appropriate to

achieve this;

• to contract no new non-concessional debt during the suspension period, other than agreements

under this initiative or in compliance with limits agreed under the IMF Debt Limit Policy (DLP) or

WBG policy on non-concessional borrowing.

Scope of Creditors

All official bilateral creditors will participate in the initiative.

Private creditors will be called upon publicly to participate in the initiative on comparable terms.

Multilateral development banks will be asked to further explore options for the suspension of debt

service payment over the suspension period, while maintaining their current rating and low cost of

funding.

Duration of the Suspension of Payment

The suspension will last until end-2020.

Creditors will consider a possible extension during 2020, taking into account a report on the liquidity

needs of eligible countries by the World Bank and IMF.

Perimeter of Maturities and Cut-off Date

The suspension period will start on May 1st, 2020.

1According to Government Finance Statistics Manual 2014 (GFSM2014) definitions.


39

Official Use

Both principal repayments and interest payments will be suspended.

A cut-off date protecting new financing in case of possible future restructuring will be set on March

24th, 2020.

Modalities for the Debt Service Suspension

The suspension of payments will be NPV-neutral.

The repayment period will be 3 years, with a one-year grace period (4 years total).

Treatment will be achieved either through rescheduling or refinancing.

Implementation Process

Creditors will implement, consistent with their national laws and internal procedures, the debt service

suspension initiative as agreed in this term sheet to all eligible countries that make a request.

Creditors will continue to closely coordinate in the implementation phase of this initiative. If needed,

creditors will complement the elements in this term sheet as appropriate.

MULTIPRONGED APPROACH FOR ADDRESSING DEBT VULNERABILITIES

40

Official Use

Annex IV. Private Financing of DSSI-Eligible Countries1

Of the 73 DSSI-eligible countries, 23 economies have outstanding Eurobonds, totaling nearly

US$71 billion at end-July 2020.2 For these countries, bondholders constitute a large share of the

external creditor base (Figure 1, left figure). The stock of Eurobonds is concentrated in a few

economies with Nigeria, Ghana, Angola, Côte d’Ivoire, Kenya and Pakistan accounting for over

70 percent of the total amount. As a percentage of GDP, borrowing in the international bond market

has been the highest for Mongolia (27 percent of 2019 GDP), Senegal (18 percent of GDP), and

Ghana (15 percent of GDP) (Figure 1, right figure).

Figure AIV.1. DSSI-Eligible Countries: Contribution of Private Sector Financing Significant portion of some DSSI-eligible countries’ debt

service is owed to private bondholders.

DSSI-eligible countries’ Eurobonds amount to about US$71

billion.

Source: World Bank, International Debt Statistics; and

Fund staff estimates and calculations.

1/ Calculations rely on future debt service figures for

2020 and 2021 on the stock of external debt outstanding

at end-2018 (submitted by country authorities).

Source: Bloomberg LLP; IMF WEO, and Fund staff

estimates and calculations.

1/ Issued by government, coverage defined by

Bloomberg (include SOE and development banks).

2/ Latest sovereign credit rating (lowest of three ratings if

more than one available), as of July 27, 2020.

The COVID-19 shock initially triggered massive capital outflows from emerging markets and

low-income countries, before stabilizing. After a precipitous outflow in bond funds from some

DSSI-eligible countries in 2020Q1, signs of stabilization appear to have emerged in Q2 (text chart).

1Private financing covers Eurobond issuance and syndicated loans in this annex.

2Includes Eurobonds issued by the government, as defined by Bloomberg. May include SOEs and development

banks, among others.

0 20 40 60 80

Congo, Republic ofEthiopia

CameroonAngola

PakistanMaldives

Papua New GuineaKenya

TajikistanZambiaRwanda

GhanaGrenada

Lao P.D.R.MozambiqueCôte d'Ivoire

SenegalHondurasMongolia

NigeriaFiji

Debt Service to Bondholders(In percent of total debt service on external debt, 2020-21 average)1

Sources: World Bank, International Debt Statistics; and IMF staff estimates and calculations.

1/ Calculations rely on future debt service figures for 2020 and 2021 on the stock of external debt

outstanding at end-2018 (submitted by country authorities).

3

5

7

9

11

13

15

0

5

10

15

20

25

30

Lao

P.D

.R.

Eth

iop

ia

Uzb

ekis

tan

Pakis

tan

Cam

ero

on

Pap

ua N

ew

Gu

inea

Co

ng

o, R

ep

ub

lic

of

Nig

eri

a

Fiji

Rw

and

a

Ben

in

Mo

zam

biq

ue

Mald

ives

Tajik

ista

n

Ken

ya

An

go

la

Ho

nd

ura

s

Gre

nad

a

Zam

bia

Cô

te d

'Ivo

ire

Gh

an

a

Sen

eg

al

Mo

ng

olia

Outstanding government bonds 1/

Latest sovereign credit rating 2/

Outstanding Government Eurobonds(In percent of 2019 GDP, as of July 24, 2020)

Sources: Bloomberg LLP; IMF WEO, and staff estimates and calculations.

1/ Issued by government, coverage defined by Bloomberg (include SOE and development banks).

2/ Latest sovereign credit rating (lowest of three ratings if more than one available), as of July 27, 2020.

BB

BB-

B+

B

B-

CCC+

CCC

CCC-

CC

C


41

Official Use

As market conditions began to stabilize in April,

bond yields began to decline, but remain

elevated for several DSSI-eligible economies.

Greater risk aversion by international investors,

coupled with debt vulnerabilities and a worsening

economic environment due to the COVID-19 shock,

pushed up the yields for non-investment grade

issuers early in the crisis, thereby keeping many of

them out of the market (Figure 2). Yield spreads on

DSSI-eligible economies’ 10-year bonds between B-

and BBB- sovereigns rose from an average 3.3

percent at end-2019 to 9.3 percent by May 2020. Resumption of the search for yield, following the

initiation of asset purchase programs of advanced economies’ central banks, has helped lower

interest rates, including for some non-investment grade DSSI-eligible issuers.

Figure AIV.2. DSSI-Eligible Countries: Yields and Spreads

The COVID-19 pandemic led to a considerable spike in

sovereign yields on DSSI-eligible bonds, …

… with yield spreads on 10-year bonds between B- and

BBB- rated sovereigns rising from an average of 3.3

percent at end-2019 to 9.3 percent by May 2020.

Sources: Bloomberg LLP; and Fund staff estimates and

calculations.

Sources: Bloomberg LLP, and Fund staff estimates and

calculations.

0

4

8

12

16

0

4

8

12

16

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20

BBB- B-

9.3%

3.3%

DSSI-Eligible Countries:

USD 10-Year Sovereign Bond Yields: BBB- vs. B-(In percent)

Source: Bloomberg LLP; and IMF staff estimates and calculations.

0

10

20

30

40

0

10

20

30

40

2015 2016 2017 2018 2019 2020

Angola B-

Côte d'Ivoire B+

Ghana B

Nigeria B-

Pakistan B-

Zambia CCC

DSSI-Eligible Countries: EMBIG Sovereign Yields(In percent)


-1,000

-800

-600

-400

-200

0

200

400

600

800

2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2

Nigeria Ghana

Angola Kenya

Ivory Coast Zambia

Mozambique Rwanda

Ethiopia Tanzania

Selected DSSI-Eligible Countries: Cross- Border Bond Flows(In USD million)

Sources: EPFR; and IMF staff estimates and calculations.


42

Official Use

Figure AIV.2. DSSI-Eligible Countries: Yields and Spreads (concluded)

Zambia and Angola continue to show signs of debt

distress, as average weighted bond spreads remain above

1,000 bps.

While bond spreads for many other DSSI-eligible countries

have declined, several countries’ bond spreads remain

above the pre-crisis level.

Source: Bloomberg LLP; and Fund staff estimates and

calculations.

1/ (Moody’s/S&P/Fitch) sovereign credit rating as of July

30, 2020.

Source: Bloomberg LLP; and Fund staff estimates and

calculations.

1/ (Moody’s/S&P/Fitch) sovereign credit rating as of July

30, 2020.

Elevated bond yields and spreads continue to make access to international capital markets

prohibitively expensive for lower-rated non-investment grade issuers. Secondary market

sovereign bond yields vary significantly by country, partly reflecting each country’s economic, debt

and financial situation. For countries experiencing bouts of distress, such as Zambia and Angola,

bond spreads remain prohibitively high – above 1,000 bps. For several other countries, bond spreads

have declined markedly from the peak levels, but remain above the pre-crisis level, particularly for

the lower-rated economies (Figure 2). This makes it difficult to raise funds in the international capital

markets, limiting the sovereign’s borrowing from private investors.

Since the onset of COVID-19, many DSSI-eligible countries have seen several sovereign credit

rating and outlook downgrades (text table). Most DSSI-eligible countries do not have a sovereign

credit rating. Others—mostly those who have previously accessed the international capital

markets—carry non-investment grade ratings, ranging from BB- (Fiji, Bangladesh, Uzbekistan) to CC

(Zambia). Several rating and outlook downgrades have taken place this year, largely reflecting

growing financing needs and deteriorating fiscal position stemming from the COVID-19 pandemic

(Table 1). Five countries—Ethiopia, Pakistan, Cameroon, Senegal and Côte d’Ivoire—were placed by

the Moody’s credit rating agency under review for downgrade in May and June after they requested

bilateral debt service suspension from G20 creditors. The decision reflected fears that DSSI

participation raises the risk of losses for private investors, since the G20 has called on private-sector

creditors to offer comparable terms, which subsequently could lead to losses to private creditors in

the short and medium run.3 Upon completing the review on 7 August 2020, neither country received

3See Hogson, C., 20 July 2020, “Moody’s Clashes with UN under G20 Debt Relief Efforts”. Available at:

https://www.ft.com/content/7d51d373-c12e-4440-a408-e61a939e3a3c

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20

Weighted Average Bond Spreads(In basis points 1/)


1/ (Moody's/S&P/Fitch) sovereign credit rating as of July 30, 2020.

Zambia

(Ca/CCC/CC)

Angola

(B3/CCC+/B-)

0

400

800

1,200

1,600

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20

Côte d'Ivoire (Ba3//B+) Ethiopia (B2/B/B) Ghana (B3/B/B)

Honduras (B1/BB-/) Kenya (B2/B+/B+) Kiribati

Mongolia (B3/B/B) Nigeria (B2/B-/B) Pakistan (B3/B-/B-)

Papua New Guinea (B2/B-/) Rwanda (B2/B+/B+) Senegal (Ba3/B+/)

Weighted Average Bond Spreads(In basis points 1/)


1/ (Moody's/S&P/Fitch) sovereign credit rating as of July 30, 2020.

Papua New GuineaNigeriaPakistan

HondurasSenegal

https://www.ft.com/content/7d51d373-c12e-4440-a408-e61a939e3a3c


43

Official Use

a rating downgrade, but Senegal and Ethiopia were placed on negative outlook. While Moody's

continues to believe that the ongoing implementation of DSSI poses risks to private creditors, it

concluded that the previous ratings already reflected the risks adequately.

Table AIV.1. DSSI-Eligible Countries: Sovereign Credit Rating Changes in 2020

Source: Bloomberg LLP; and Fund staff estimates and calculations.

Note: Changes highlighted in blue. Data as of August 20, 2020.

In the first half of 2020, private financing of DSSI-eligible countries amounted to about $6.5

billion, well below the 2016-19 average ($10.7 billion, over the same period). Only one DSSI-

eligible country has issued a Eurobond post-COVID-19 (Honduras), and several economies received

syndicated loans, albeit of smaller amounts. This contrasts with some non-DSSI lower-rated issuers,

which continued to tap the international capital markets in 2020 (Albania B+, Belarus B, Jordan B+,

El Salvador B-, Ukraine B, etc).

Compared to the previous four years, DSSI- eligible countries have raised less private

financing in 2020 (Figure 3). Only two countries have issued Eurobonds in 2020: Ghana (pre-

COVID), and Honduras.

• Taking advantage of the near-perfect issuing conditions in early 2020 (pre-COVID), Ghana

(B3/B/B) returned to the international bond market after less than a year’s absence with a

US$3 billion amortizing triple-tranche issue on 4 February 2020. The issue was

oversubscribed about 4.7 times.

• Following the completion of the IMF’s Second Review Under SBA and SCF Arrangement and

the approval of the augmentation of access to support Honduras’ COVID-19 measures,

Honduras (B1/BB-/) returned to the international markets after a 3-year absence to issue a

US$600m 10-year deal at 5.625 percent coupon. The country received a positive response

from investors with high-yield appetites, with books seven times oversubscribed. Honduras

has an upcoming US$500 million issue maturing later this year on 16 December 2020.

Country

Rating Outlook Date Rating Outlook Date Rating Outlook Rating Outlook Date Rating Outlook Rating Outlook Date

Angola B3 Stable 4/27/2018 B3 Under review 3/31/2020 B- Negative CCC+ Stable 3/26/2020 B Negative B- Stable 3/6/2020

Cape Verde B Positive B- Stable 4/17/2020

Cameroon B2 Under review 5/27/2020 B2 Stable 8/7/2020 B Negative B- Stable 4/10/2020

Ivory Coast Ba3 Under review 6/12/2020 Ba3 Stable 8/7/2020

Ethiopia B2 Under review 5/7/2020 B2 Negative 8/7/2020

Lao P.D.R. B3 Under review 6/19/2020 Caa2 Negative 8/14/2020 B- Stable B- Negative 5/15/2020

Maldives B2 Negative B3 Negative 5/21/2020

Nicaragua B2 Negative B3 Stable 2/14/2020

Nigeria B Negative B- Stable 3/26/2020 B+ Negative B Negative 4/6/2020

Pakistan B3 Under review 5/14/2020 B3 Stable 8/7/2020

Papua New Guinea B Stable B- Stable 4/28/2020

Senegal Ba3 Under review 6/12/2020 Ba3 Negative 8/7/2020

Republic of Zambia Caa2 Negative Ca Stable 4/3/2020 CCC+ Stable CCC Negative 2/21/2020 CCC Negative CC n/a 4/16/2020

Source: Bloomberg LLP; and IMF staff estimates and calcualtions.

1/ Changes highlighted in blue. Data as of August 20, 2020.

Credit Rating

Previous New

Moody's S&P Fitch

Previous New

Credit Rating Credit Rating

Previous New

https://www.imf.org/en/News/Articles/2020/06/01/pr20230-honduras-imf-execboard-completes-2nd-rev-under-sba-scf-arrange-approves-support-COVID19


44

Official Use

Figure AIV.3. DSSI-Eligible Countries: Sovereign Eurobond and Syndicated Loan Issuance 2020 to date, Eurobond and syndicated loan issuance by

DSSI-eligible countries has fallen short of the 2016–19

January-July average.

With a large portion of this year’s issuance taking place

pre-COVID-19 (January and February).

Source: Dealogic; BondRadar; Bloomberg LLP; and Fund

staff estimates and calculations.



Only one DSSI-eligible country has issued Eurobonds since

the start of the pandemic: Honduras (“BB-“ rated) in June. More countries were able to access syndicated loans in

2020Q2: Côte d'Ivoire, Senegal, Ghana, Lao PDR, and

Malawi.





The 23 DSSI-eligible countries with

outstanding Eurobonds have about

US$3.4 billion in bond debt service

payments coming up between end-

July and December of 2020. This

includes about US$1 billion in principal

and US$2.4 billion in interest payments

(text chart).

0

5

10

15

20

25

2016 2017 2018 2019 YTD July 2020

Eurobond

Syndicated Lending

2016-19 January-July

average:

$10.7 billions

DSSI-Eligible Countries: Government Private Financing(In USD billion)

Sources: Dealogic; BondRadar; Bloomberg LLP; and IMF staff estimates and calculations.

0

1

2

3

4

5

6

7

2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2

Eurobond Syndicated Lending

DSSI-Eligible Countries: Government Private Financing(In USD billion)


0

1

2

3

4

5

6

2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2

BB- B+ B B-

DSSI-Eligible Countries: Government Bond Issuance(In USD billion, by sovereign credit ratings)


0

0.5

1

1.5

2

2.5

3

2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2

BB- B+ B B- NR

DSSI-Eligible Countries: Syndicated Loan Issuance(In USD billion, by sovereign credit rating)


0

2

4

6

8

10

12

14

2020 2021 2022 2023 2024 2025

Principal

Interest

Projected Debt Service on Eurobonds(In USD million, debt services on government Eurobonds, as of July 27, 2020 1/)

Sources: Bloomberg LLP; and IMF staff estimates and calculations.

1/ Includes 23 DSSI-eligible countries. Eurobonds issued by government, coverage defined by Bloomberg (include SOE

and development banks).

end-July to December


45

Official Use

Given current ratings and spreads, market access for most DSSI-eligible countries’ market

access currently appears limited. Historically, there has been no issuance by a CCC+ or lower rated

countries and very limited issuance at spread above 600 bps during the past 20 years. While 11

countries of 23 DSSI-eligible countries with credit ratings are rated B or higher, only 4 countries are

trading at spreads below

600 basis points. Under

current condition, new

bond issuance and

access to syndicated

loans is likely to be very

limited.

Future market

conditions will largely

determine the

prospect of how fast

non-investment grade

sovereigns can recover

their market access to

deal with redemptions

falling due in 2021.

Elevated bond yields

have made access to

international capital markets prohibitively expensive for some lower-rated non-investment grade

issuers. However, continued easing of market conditions amid global resumption of the search for

yield, fueled by advanced economies’ large asset purchase programs, could help open up issuance

prospects for non-investment grade issuers.

UZB, BB-HND, BB-

FJI, BB-

RWA, B+SEN, B+KEN, B+BEN, B+CIV, B+

ETH, B

PNG, B

MDV, B

MNG, B-

PAK, B-NGA, B-CMR, B-GHA, B-LAO, B-TJK, B-

AGO, CCC+MOZ, CCC

COG, CCC

0

500

1000

1500

2000

2500

BB- B+ B B- CCC+ CCC

DSSI-Eligible Countries: Sovereign spread by credit ratings

Source: Bloomberg.

Sove

reig

n s

pre

ad a

so

f en

d-J

uly

,20

20

(in

bp

s)

> 600 bps

B- or worse

ZMB, CC+

(3652)GRD, NR (3992)

DC2020-0007 October 16, 2020 · Overall, the crisis could push 100 million people into extreme...

Documents

Transcript of DC2020-0007 October 16, 2020 · Overall, the crisis could push 100 million people into extreme...